Roundtable part 2: Will Microsoft + Yahoo give everyone what he wants?

It's a vast and complex chess game Microsoft has launched, and with Google now wedging its foot in the door, there are more interests at stake now than just theirs and Yahoo's. Our panel of experts examine what's now at stake.

Last Friday, BetaNews spoke at length with a panel of experts analyzing the Microsoft takeover bid for Yahoo. Among the topics we discussed was trying to identify the motivations behind everyone involved at this point -- not just Yahoo and Microsoft but their various allies and partners, their competitors, and all of their customers. What does everyone want to come out of this clash of the titans? Or will customers be happier if all of this just stops?

One potential prize for Microsoft, in the opinion of Burst Media CEO Jarvis Coffin -- who runs an advertisers' and publishers' service company that currently competes with DoubleClick -- is the same kind of prize Google foresees from its possible DoubleClick merger: a viable and potent online display advertising business.

"Yahoo is synonymous with the dawn of the commercial Internet, and has played a leading role -- and its leaders are still there," Coffin pointed out. "And I'm sure for many of them, it will be a very hard thing to accept this offer, particularly since I think Yahoo has stumbled in the last 18 months, but [also because] they have been going about the hard business of selling brand display advertising for longer than just about anybody. And it is branded display advertising that is expected to power the growth of the Internet to a $50 to $60 billion business over the next three to four years.

"My argument would be that they [Yahoo] are as well equipped as anyone else to succeed in that environment," he went on. "They took their lumps as a function of rapid growth to paid search, and then as a function of the fact that ad exchanges and social networking flooded the market with a lot of cheap, remnant inventory, and it hurt their display advertising business. But display advertising business, I certainly believe, will prevail long-term, and they've forgotten more about how to sell that stuff online than Google knows, and probably a good part of Microsoft knows."

What Coffin's referring to with respect to "remnant inventory" is the non-prime advertising spaces all over the Web, the tougher spots to sell but which someone has to sell at some time. Google's initial approach to this problem was to enable publishers to plug their non-prime spots with AdSense. But that solution only goes so far. Yahoo acquired an approach last year that many see as somewhat more innovative: an ad exchange called Right Media that sells non-prime slots all over the Web in batches, the way electronic stock exchanges sell shares.

"I'm sure that Microsoft, as brand-conscious and brand-protective as it is, and Yahoo for that matter, are thinking more about how they're going to create higher media value as a result of all of this transaction, rather than how they're going to harvest a bunch of remnant inventory around the Internet," said Coffin.

Microsoft will need similar innovative approaches if it intends to compete with market leader Google, which has at least two-thirds of the paid search market locked up, by Microsoft's own estimate. But as AR Communications Senior Vice President Carmi Levy believes, Microsoft actually needs something else: literally, more weight.

"Only Microsoft's and Yahoo's counter-weights to Google have the heft to even have a chance of surviving against Google's onslaught," Levy told us. "So even though Microsoft was willing at some point to leave part of this place to others, smaller innovators, rest assured, Microsoft's a company that grows by acquisition. Microsoft would've come looking for those technologies and those platforms eventually anyway. Microsoft does not develop leading-edge technology. Microsoft acquires it."

Timing is one of Microsoft's many talents in this department. And as Levy pointed out, there is a critical element of Yahoo's own corporate scheduling which made last Friday a now-or-never moment for Microsoft.

"It's almost like all the planets aligned this week, and it's the perfect time for Microsoft to pull the trigger," Levy told BetaNews.

"Yahoo doesn't have a staggered board of directors where appointments come due on a rotating basis. Their board, in fact, is elected all at the same time," noted Levy. "So they're quite vulnerable to external intervention if Microsoft manages to campaign to get its people to stand for election, and thus make the board much more sympathetic to a potential offer. Microsoft knew that going in when it made this offer, and that's why they were so bold, so up front, and so transparent in the wording of that offer."

Next: Of black, white, and "grey" knights...